Supreme Court Grants Certiorari in Copyright, Patent Cases

Supreme Court Grants Certiorari in Copyright, Patent Cases

 WASHINGTON, D.C. — (Mealey’s) The U.S. Supreme Court on Oct. 1 announced that it will hear oral arguments in three intellectual property disputes presenting issues that range from the availability of a laches defense to the proper standard for an award of attorney fees. 

In the first list of orders following summer recess, the Supreme Court granted certiorari in Petrella v. MGM (No. 12-1315; See July 2013, Page 20), Highmark Inc. v. Allcare Health Management Systems (No. 12-1163) and Octane Fitness v. ICON Health & Fitness Inc. (No. 12-1184).

Screenplay

Petrella poses the following question:  “Whether the nonstatutory defense of laches is available without restriction to bar all remedies for civil copyright claims filed within the three-year statute of limitations prescribed by Congress, 17 U.S.C. § 507(b) [an annotated version of this statute is available to lexis.com subscribers].”  At issue is a copyright for Frank Petrella’s 1963 screenplay “The Raging Bull,” which chronicles the life of boxing champion Jake LaMotta.  Frank Petrella, who died in 1981, assigned his copyrights to Chartoff-Winkler Productions, which in turn sold its rights to United Artists Corp., a subsidiary of respondent Metro-Goldwyn-Mayer Inc. (MGM).  In 1980, United released “Raging Bull,” a critically acclaimed movie based on LaMotta’s life.  Petrella’s daughter Paula Petrella filed a copyright renewal application for the screenplay in 1991 and asserted in written correspondence to MGM that any further exploitation of the film would represent copyright infringement. 

In 2009, she sued MGM in the U.S. District Court for the Central District of California, but the defendant prevailed on laches grounds.  The Ninth Circuit U.S. Court of Appeals later affirmed, after agreeing with the District Court that Paula Petrella’s decision not to file suit until 2009 constituted an unreasonable delay that unfairly prejudiced MGM.  The Ninth Circuit based its decision on Danjaq LLC v. Sony Corp., 263 F.3d 942 (9th Cir. 2001) [an enhanced version of this opinion is available to lexis.com subscribers], which established that laches can bar all relief, both legal and equitable, when “(1) the plaintiff delayed in initiating the lawsuit; (2) the delay was unreasonable; and (3) the delay resulted in prejudice.”  Circuit Judge William A. Fletcher filed a concurring opinion, however, stating that the decision was correct but only because the panel was compelled to follow the Ninth Circuit's decision in Danjaq.  “There is a severe circuit split on the availability of a laches defense in copyright cases,” Judge Fletcher said.  “Our circuit is the most hostile to copyright owners of all the circuits.”

Deference

In Highmark, petitioner Highmark Inc. of Pennsylvania poses the question “Whether a district court’s exceptional-case finding under 35 U.S.C. § 285 [annotated version], based on its judgment that a suit is objectively baseless, is entitled to deference.”  Respondent Allcare Health Management Systems Inc. owns U.S. patent No. 5,301,105, which is directed to managed health care systems and is used in “utilization review” to connect and integrate physicians, medical care facilities, patients, insurance companies and financial institutions.  In a 2002 complaint before the U.S. District Court for the Western District of Pennsylvania, Highmark sought a declaration that its Navinet system does not infringe the ‘105 patent.  After the case was transferred to the Northern District of Texas, Allcare counterclaimed for infringement of claims 52, 53 and 102.  The District Court appointed a special master to resolve issues of claim construction, and the special master issued a claim construction report.

Highmark moved for summary judgment, which Allcare opposed with respect to claims 52 and 53 but did not oppose with regard to claim 102 and withdrew the infringement allegations with respect to that claim. The District Court reappointed the special master, who recommended granting Highmark summary judgment of noninfringement of claims 52 and 53.  The District Court adopted the special master’s recommendations and entered final judgment of noninfringement in favor of Highmark.  Allcare appealed to the Federal Circuit U.S. Court of Appeals, which in 2009 affirmed the District Court’s judgment under Federal Circuit Rule 36 without a written opinion.  While the appeal was pending, however, Highmark moved for an exceptional case finding with respect to Allcare and an award of attorney fees and expenses under Section 285 of the Patent Act and for sanctions against Allcare’s attorneys under Federal Rule of Civil Procedure 11.

Award Reversed

The District Court again sided with Highmark. Specifically, the District Court held that Allcare’s claim for infringement of claims 52 and 102 were frivolous and that Allcare engaged in litigation misconduct by asserting a frivolous position based on res judicata and collateral estoppel, shifting its claim construction position throughout the proceedings and making misrepresentations to the Western District of Pennsylvania in connection with the motion to transfer venue.  Based on these findings, the District Court awarded Highmark $4,694,727.40 in attorney fees and $209,626.56 in expenses.  The court also invoked its inherent power to impose sanctions and awarded $375,400.05 in expert fees and expenses.  Allcare’s attorneys then withdrew from the case based on conflicts of interest and separately moved for reconsideration of the Rule 11 sanctions, providing additional evidence about their representation of Allcare.  Based on the evidence, the District Court vacated the Rule 11 sanctions against the attorneys.

After the District Court denied Allcare’s motion to reconsider the exceptional case finding and judgment awarding attorney fees or, in the alternative, to grant a new trial or hold an evidentiary hearing, Allcare appealed to the Federal Circuit, which on Aug. 7, 2012, reversed the exceptional case finding in part in a divided opinion.  The panel majority, after a de novo review, affirmed the exceptional case finding for Allcare’s claim 102 infringement allegation but reversed the finding as to claim 52.  The majority held that Allcare’s construction of claim 52 was not objectively baseless because there “was support in the [patent] specification for Allcare's position.”  The majority, holding that none of the instances of litigation misconduct found by the District Court separately warranted an exceptional case finding, remanded for a calculation of attorney fees based only on the frivolity of the claim 102 allegations.  Highmark petitioned for rehearing en banc, which the Federal Circuit denied in a 6-5 vote that yielded two dissents.

‘Rigid’ Test

In Octane, petitioner Octane Fitness LLC asks “Does the Federal Circuit's promulgation of a rigid and exclusive two-part test for determining whether a case is ‘exceptional’ under 35 U.S.C. § 285 improperly appropriate a district court’s discretionary authority to award attorney fees to prevailing accused infringers in contravention of statutory intent and this Court’s precedent, thereby raising the standard for accused infringers (but not patentees) to recoup fees and encouraging patent plaintiffs to bring spurious patent cases to cause competitive harm or coerce unwarranted settlements from defendants?”  In a 2009 complaint filed in the U.S. District Court for the District of Minnesota, respondent ICON Health & Fitness Inc. alleged infringement of its U.S. patent No. 6,019,710 by Octane’s Q45 and Q47 elliptical machines.  The District Court construed various disputed claims of the ‘710 patent and granted Octane summary judgment.

After ICON and Octane stipulated to the dismissal of Octane’s counterclaim for a declaratory judgment of invalidity of the ‘710 patent, the District Court entered a final judgment, and ICON appealed to the Federal Circuit.  While the appeal was pending, Octane moved for a declaration that the case is exceptional and an award of more than $1.3 million in attorney fees pursuant to 35 U.S. Code § 285.  Octane argued that the unreasonable and baseless positions maintained by ICON throughout the litigation, in addition to emails and deposition testimony evidence, showed that ICON’s suit was vexatious and unjustified and warranted a finding of exceptional case status and fees.  The District Court in September 2011 denied the request, after finding that to be exceptional, ICON’s case “must have no objective foundation, and the plaintiff must actually know this.”

Octane appealed the attorney fee ruling to the Federal Circuit, which consolidated the matter with ICON’s appeal.  On Oct. 24, 2012, the Federal Circuit affirmed both rulings. The Federal Circuit denied rehearing and rehearing en banc, and Octane filed a petition for writ of certiorari with the Supreme Court presenting the following question:  “Does the Federal Circuit's promulgation of a rigid and exclusive two-part test for determining whether a case is ‘exceptional’ under 35 U.S.C. § 285 improperly appropriate a district court's discretionary authority to award attorney fees to prevailing accused infringers in contravention of statutory intent and this Court’s precedent, thereby raising the standard for accused infringers (but not patentees) to recoup fees and encouraging patent plaintiffs to bring spurious patent cases to cause competitive harm or coerce unwarranted settlements from defendants?”  ICON said in its response brief  that the question presented is:  “Should this Court reverse the lower courts through judicial expansion of the attorney fee-shifting statute found in 35 U.S.C. § 285?”

Counsel

Paula Petrella is represented by Stephanos Bibas, James A. Feldman and Nancy Bregstein Gordon of University of Pennsylvania Law School Supreme Court Clinic in Philadelphia and Glen L. Kulik of Kulik Gottesman & Siegel in Sherman Oaks, Calif.  Mark A. Perry and Blaine H. Evanson of Gibson, Dunn & Crutcher in Washington, Jonathan Zavin of Loeb & Loeb in New York and David Grossman of Loeb & Loeb in Los Angeles represent MGM.

Highmark is represented by Neal Kumar Katyal and Dominic F. Perella of Hogan Lovells in Washington and Cynthia E. Kernick, James C. Martin, Kim M. Watterson, Kevin S. Katona and Thomas M. Pohl of Reed Smith in Pittsburgh.  Donald R. Dunner of Finnegan, Henderson, Farabow, Garrett & Dunner in Washington and Erik R. Puknys of the firm’s Palo Alto, Calif., office represent Allcare. 

Octane is represented by Rudolph A. Telscher Jr. and Kara R. Fussner of Harness, Dickey & Pierce in St. Louis.  Larry R. Laycock, David R. Wright and Jared J. Braithwaite of Maschoff Brennan Laycock Gilmore Israelsen & Wright in Salt Lake City represent ICON.

Mealey's is now available in eBook format!

For more information about LexisNexis products and solutions connect with us through our corporate site.